Cyprus's rightwing leader Nicos Anastasiades believes his country will default following the move, and threaten to unravel investor confidence in the eurozone. Photograph: Jamal Saidi/REUTERS

Cypriots reacted with shock that turned to panic on Saturday after a 10% one-off levy on savings was forced on them as part of an extraordinary 10bn euro (£8.7bn) bailout agreed in Brussels.

People rushed to banks and queued at cash machines that refused to release cash as resentment quickly set in. The savers, half of whom are thought to be non-resident Russians, will raise almost €6bn thanks to a deal reached by European partners and the International Monetary Fund (IMF). It is the first time a bailout has included such a measure and Cyprus is the fifth country after Greece, the Republic of Ireland, Portugal and Spain to turn to the eurozone for financial help during the region's debt crisis. The move in the eurozone's third smallest economy could have repercussions for financially overstretched bigger economies such as Spain and Italy.

People with less than 100,000 euros in their accounts will have to pay a one-time tax of 6.75%, Eurozone officials said, while those with greater sums will lose 9.9%. Without a rescue, president Nicos Anastasiades said Cyprus would default and threaten to unravel investor confidence in the eurozone. The Cypriot leader, who was elected last month on a promise to tackle the country's debt crisis, will make a statement to the nation on Sunday.

The prospect of savings being so savagely docked sparked terror among the island's resident British community. At the Anglican Church's weekly Saturday thrift shop gathering in Nicosia, Cyprus's war-divided capital, ex-pats expressed alarm with many saying that they had also rushed to ATMs to withdraw money from their accounts. "There's a run on banks. A lot of us are really panicking. The big fear is that there soon won't be cash in ATMs," said Arlene Skillett, a resident in Nicosia. "People are worried that they're automatically going to lose ten present [of their savings] in deposit accounts. Anastasiades won elections saying he wouldn't allow this to happen."

She said a lot of elderly Britons had transferred savings to the island when they had decided to retire there. "Nobody can understand how they can do this – isn't it illegal? How can they just dock money from your account?" she asked.

In the coastal town of Larnaca, Cypriots described how they had queued from the early hours in the hope of withdrawing deposits from banks. "A lot of us just can't believe it," said Alexandra Christofi, a divorcee in her 40s who said she had rushed to her bank before doors even opened at 6am. "I had put my money there for a rainy day. It's absolutely all I have and I cannot understand how Cyprus is being singled out. Other EU countries got bailouts and we're only in this position because we supported Greece," she said, referring to the massive losses the Cypriot banking system suffered as a result of Greece's restructuring its debt last year. "Where is the fairness in that? Where is the solidarity and support that is meant to be the reason why we are all unified in this common currency in the first place?"

Maria Zembyla, from Nicosia, said the levy would make a "big dent" in her family's savings and "erode the investor confidence". "It is robbery. People like us have been working for years, saving to pay for our children's studies and pensions and suddenly they steal a big share of this money. Russians that currently keep the economy afloat will leave the country along with their money," she added.

Howard Skelton, in Limassol, said: "The only people who will benefit in the long term are the banks. It will be many years before the man in the street begins to feel any benefit from this bailout. The sooner I can return to the UK the better."

The levy does not take effect until Tuesday, following a public holiday, but action is being taken to control electronic money transfers over the weekend. Co-operative banks, the only ones open in Cyprus on a Saturday, closed following a run on the credit societies while ATMs cancelled transactions due to "technical issues".

"I wish I was not the minister to do this," Cypriot finance minister Michael Sarris said after Friday's late-night talks in Brussels. "Much more money could have been lost in a bankruptcy of the banking system or indeed of the country."

Depositors started queuing early to withdraw their cash, and protestors gathered outside the presidential palace. "I'm extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans," said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

"They call Sicily the island of the mafia. It's not Sicily, it's Cyprus. This is theft, pure and simple," said a pensioner.

IMF managing director Christine Lagarde, who attended the meeting, said she backed the deal and would ask her board in Washington to contribute to the bailout. "We believe the proposal is sustainable for the Cyprus economy," she said, "The IMF is considering proposing a contribution to the financing of the package. The exact amount is not yet specified."